Business Debt Advice for directors: What are my options?
Dealing with business debts can be stressful, especially when you can’t see an end to it. In this article, we’ve put together a guide to business debt advice for directors.
Where to begin with business debt advice
If you are a director of a business which has got itself into debt, you will undoubtedly want to get the company back on track if at all possible. Several options are available to you to alleviate the issues, including corporate restructuring, shutting the doors or starting again via a pre-pack.
However, if the debt is so bad that closing the company becomes the only option, there are ways to avoid compulsory liquidation. Directors and shareholders can have more control over liquidating a company than you might realise.
We have put together the following business debt advice to help guide you through it. If you’re feeling overwhelmed by the information, we recommend seeking professional advice tailored to your business finances. We’re happy to provide a free, no-obligation consultation.
What is an insolvency practitioner?
A licensed insolvency practitioner (IP) is someone who is fully licensed to help companies of any type and size with any debt issues they are facing. The licensed insolvency practitioner will work closely with your company to fully understand the gravity of your situation and will be able to discuss the multitude of options available to you. These can include rescuing the business or closing it in a way that best suits those involved in the company. In addition, they will suggest the right recovery or insolvency procedure for your needs, guiding you through every step of the process and offering expert advice for your limited company.
1st Business Rescue has a panel of trained and highly-experienced IPs who are well-placed to help businesses make the right decision.
Closing your business – what are the options?
If your debts are so significant you need the business to cease trading or simply that you do not wish for the company to carry on, there is one key option available to you – a Creditors’ Voluntary Liquidation, or CVL. As a voluntary procedure, it allows the directors to maintain some control over the closure and can help to minimise further losses to creditors. It is also extremely valuable in reducing the likelihood of wrongful trading and protecting the directors.
In a creditors voluntary liquidation, a licensed insolvency practitioner will try to recover debts for creditors directly through the sale of company assets. This may include using any leftover business finance or stock.
Restarting your business – what are the options?
If the core business is still viable and would operate successfully as part of another enterprise, it might make sense to free it from creditor liabilities and restart. If this is appropriate, a Pre-Pack Liquidation or Administration procedure might be the best solution.
The insolvent company’s assets (oldco) will be sold to the new company (newco), allowing this new business to trade without the debt burden. In some cases, staff and ongoing projects could be carried over. This process is only allowed if it is deemed to be in the best interests of the old company’s creditors.
We can support you with bounce-back loan advice, find out more about bounce-back loan fraud.
Continuing the business – what are the options?
If the core of your business is viable, but overall, it is insolvent, the company might be saved rather than using Pre-Pack Liquidation. Here are the options you can take to save it:
Re-financing/Re-structuring
It may be possible to reduce debt by bringing in more investment or capital, which can be sourced in different ways, subject to the business itself. These include invoice financing, sourcing investment, asset-based lending, financial restructuring and consolidation through loans.
Administration
If the company will likely collapse due to creditor pressure, an administration can take charge of the situation. It ceases pending creditor action to prevent them from claiming important business debts via more severe channels. This allows the company to be assessed so it can follow the best course of action for it to be rescued.
Company Voluntary Arrangement (CVA)
This is the best solution for companies that look to have a future, but it will require effort from the directors. The company will have to pay the appointed IP, according to what it can afford, over a specified period. The creditors will then receive payments in relation to what they are owed. Once complete, the company is then able to continue without any further debt constraints. You should follow all business debt advice to complete the company voluntary arrangement correctly.
Business debt advice for other problems
The directors can raise questions about the different business debt problems and liabilities associated with the company, e.g., personal liability and debts to HMRC. Here’s some more information:
Personal debts
Any directors of limited companies should be personally protected from business debts, and equally, the business will be protected from any personal debts. This changes if the director has signed a personal guarantee for the debt or if there is an overdrawn Director’s Loan Account. You should ensure that the liquidator has checked your loan account before appointing them.
Debts to HMRC
If you owe money to HMRC and are struggling to pay it, then a Time to Pay (TTP) Arrangement could help. You will be able to arrange to repay the debt in instalments over a specified period of time rather than in a lump sum. This will enable the company to continue operating by allowing cash flow to continue. HMRC usually agrees upon the payment arrangement if they see no long-term mismanagement of business finances.
Bailiffs
Bailiffs are used in certain circumstances to seize assets in lieu of debt repayments not being made. The likelihood of them trying to reclaim your assets specifically will depend entirely on the type of debt you have accrued, with whom and how much. We will be able to discuss this with you and provide further information.
Next steps: Business debt advice
If your company is struggling with debt and you would like to manage it proactively, contact the experts at 1st Business Rescue. We have a panel of licensed insolvency practitioners who can guide you and your business along the appropriate path in a structured and legal manner to mitigate risks. Contact us as soon as possible regarding business debt advice to achieve the best outcome.
Business Debt Advice FAQs
What kind of business debt advice does 1st Business Rescue offer?
We can support you with all business debt advice, whether your business is struggling or you just need some simple advice. We speak to many directors dealing with debts. Some directors contact us way before a problem arises, and others are assessing their best options. We are transparent and honest about all debt advice.
Who can benefit from the business debt advice by 1st Business Rescue?
Our services are tailored to directors, we’ve got your back at times when you might be struggling. Every director we speak to states how much better they feel after just one conversation. Don’t waste another day worrying about business debt, seek advice from 1st Business Rescue.
How can I contact 1st Business Rescue for business debt advice?
You can use our contact page to find our phone number, email address and business address. Alternatively, you can book a virtual appointment with our experts on our website here.
Can 1st Business Rescue guarantee the success of their business debt advice and solutions?
Your success with business debts depends on many factors. What we can guarantee is that we will be here for you at every step. We’ll offer you honest advice so that you can make informed decisions throughout the process of dealing with your business debt.
I'm Chris Worden, Managing Director at 1st Business Rescue. With over 7 years of experience, I help UK directors navigate the complex world of UK corporate insolvency. We offer free and independent advice to UK directors and advise them about what options may be available to them if their limited company starts to struggle.
I am passionate about helping other directors overcome their business challenges and get back on their feet, as I was once in the same position as them. I had a business that became insolvent, and the advice out there was confusing and overwhelming. I am here to provide honest and valuable advice to UK directors.
I am proud to say that we are one of the only 5-star corporate insolvency companies on Trustpilot with hundreds of 5-star reviews, and we publish videos weekly on our YouTube channel. Our channel is designed to educate UK directors about insolvency and debt advice. Check it out here:
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